Data protection & competitiveness: assessing the economic costs

Transcription

1 Data protection & competitiveness: assessing the economic costs ECIPE Presentation for European Chamber of Commerce Singapore, June 25, 2014! Bert Verschelde, Research Associate Erik van der Marel, Senior Economist

2 Outline The importance of free cross-border data flows What, why and for whom has the internet done? The economic impact of data flow restrictions Why important for all firms? Channels through which data flows have impact Conclusion Final policy implications of data flow restrictions

3 Importance of cross-border data flows! The importance of free cross-border data flows The economic impact of data flow restrictions Laws, methodology & results Conclusion

4 Importance of cross-border data flows The Internet has transformed international trade: E-commerce: and the digitalisation of products: books, music, movies, taxis, medical equipment etc. are increasingly supplied digitally Servification: global commerce and manufacturing is increasingly dependent on services, in large part thanks to the Internet and ICT Global value chains: data services / ICT glues fragmented production lines across countries; GVCs specifically important in Asian region.

5 Importance of cross-border data flows Both of these developments are driving growth E-commerce Korea standout ecommerce market (Borderfree report) Indonesia to boom in the next two years (Redwing report) Vietnam has huge untapped potential Servification +/-- half of services trade is facilitated by ICT (UNCTAD, 2009) Data accounts for 4 31% of production input in services Services & internet tool for development Global value chains: input trade; tariffs still valuable?

6 The economic impact of data flow restrictions! The importance of free cross-border data flows The economic impact of data flow restrictions Laws, methodology & results Conclusion

7 The economic impact of data flow restrictions Recent proliferation of data restrictions across countries Dev d & dev ing; recent news; impact on economy (SMEs) Data localization / data storage locally wider effects internet companies: finance, retail, manufacturing, logistics Regulatory hurdles leads to productivity losses (TFP) Businesses processes rely on access to personal data Business models, HR, headquarter services, marketing Technical data vs. personal data hard to distinguish Cloud computing; Big-data ; Internet-of-things

8 The economic impact of data flow restrictions Sector Intensity of data services use Communications 31.8 Business / ICT services 6.8 Financial services 5.0 Machinery 4.9 Other consumer services 4.8 Other business services 4.0 Distribution 3.7 Transport 3.2 Chemicals 0.8

9 Four channels of data restrictions Price increases: domestic data services providers faced with increased costs, firms are required to store and process data locally Trade barrier: external data service providers faced with an additional trade barrier against data processing and internet services. Investment channel: Indonesian exporters face higher input costs due to the regulation, they suffer a comparative disadvantage, less attractive to foreign investment (FDI) R&D channel: the effectiveness of R&D is affected to the extent that product development relies on customer and market data, crucial for innovations in services and goods!

10 Four channels of data restrictions In short, who are hurt? Domestic producers / exporters: their exports become less competitive, due to increased production costs, in effect a productivity loss (TFP) Consumers: price increases lead to a direct welfare loss for consumers consuming end-goods; lower investment leads to job losses. Foreign service providers: incur higher production costs through required IT capacity expansion and face extra regulatory hurdles to market access.

11 Study ECIPE! The importance of free cross-border data flows The economic impact of data flow restrictions Laws, methodology & results Conclusion

12 Study ECIPE! Indonesia: ITE law and GR82 Vietnam: Decree 72 Korea: PIPA & Partial data localisation in financial services! Map out most important barriers that have an effect

13 Study ECIPE Quantifies the costs of data flow restrictions by using different models: Analysing of data services intensity across all sectors of a typical economy such as Indonesia, Korea or Vietnam Introducing price increases and TFP losses to domestic economy to estimate productivity impact of regulation Estimating economic impact on domestic GDP, and trade and investment flows for an economy By taking stock of IDN/ KOR/ VNM position in world economy

14 Study ECIPE GDP Investment Exports Korea -1.1% -3.6% -0.3% Indonesia -0.7% -2.6% -0.5% Vietnam -1.7% -3.1% -1.7%

15 Conclusion The Internet and cross-border data flows are rapidly transforming global trade, while driving economic growth Data flows will be of paramount importance to growth trajectory in next few years Restrictive regulation would heavily impact the domestic economy by decreasing productivity, hampering exports and discouraging investment Designing data protection regulation in a way that does not impede crossborder data flows will be crucial to maintain competitiveness, in search of common policy through out ASEAN?